Pischetsrieder to launch new phase of VW cost-cutting, report says

FRANKFURT -- Volkswagen plans another multi-billion-euro cost-cutting program in 2006 to 2008 to help offset sagging car markets and rampant price wars, its chief executive told the Frankfurter Allgemeine Zeitung on Monday.

In an interview with the German daily, Bernd Pischetsrieder also said that Gulf emirate Abu Dhabi remained interested in taking a stake in Volkswagen despite a collapse in talks last year over the purchase of a holding.

"By November this year, we will decide on a budget plan for the next three years including 2008," Pischetsrieder said in the interview, to be published on Tuesday. "By 2008, more than 4 billion euros ($4.91 billion) in measures aimed at improving earnings could be necessary again," he continued, adding that this did not include just cost-cutting measures.

Europe's largest carmaker is already planning to achieve cost savings of 3.1 billion euros this year to help it reach its forecast of higher operating and pretax profit this year before and after special effects.

The CEO said he aims to save more than 1 billion euros in material costs alone next year, while another 1 billion euros in personnel costs are expected to be saved as a result of its labor agreement late last year.

He did not specify further how much of the 3.1 billion euros in earnings improvements planned for 2005 could be sustainable and contribute to the new cost-cutting program.

Pischetsrieder also said the core VW brand would return to the black this year after suffering an operating loss of 200 million to 300 million euros in 2004.

Nonetheless, when asked whether the 9 percent return on capital target for the core automobile division could be reached in 2006, Pischetsrieder replied: "No, that is unrealistic."

Finance chief Hans Dieter Poetsch had previously said only that he would not back down from the target yet, despite managing only a 1.2 percent return in 2004.

When asked whether Abu Dhabi was still considering acquiring a holding in VW, Pischetsrieder said that the interest on both sides was still present.

"If another opportunity like LeasePlan presents itself, then we can resume concrete talks," the Volkswagen CEO said.

The Wolfsburg-based carmaker formed a joint venture with Abu Dhabi and a Saudi investment vehicle last year to acquire fleet management firm LeasePlan for 2 billion euros. Volkswagen would control 50 percent, while the other two shareholders would own 25 percent each.

VW had originally planned to sell Abu Dhabi up to a 10 percent stake in the company it held in treasury shares as payment for its 50 percent stake in LeasePlan, but talks collapsed after the two sides failed to agree on a price.

"If one uses our share price from today, then we may have been able to reach an agreement with Abu Dhabi," Pischetsrieder added.